[quote pid='16588' dateline='1551873226']
But as WB has said--no one ever went broke taking a little profit off the top--something like that...
[/quote]
The "off the top" part of that statement is probably the key to increased probability of success. When things go your way, peeling some profits will often be wise. My investing heroes like WB say a lot of things, and added all together you get some contradictions you have to sort through.
WB's number # rule is don't lose money. That's a little vague of course, and to me it means don't take unnecessary risk. If you put a kill shot on your port it's hard to recover. WB is also a value investor, that is inarguable. Now add those two rules together and it implies you don't mindlessly hold a huge position in KO when there is no hope a low growth industry can justify the PE even if a decade of good times occur. I am cherry picking one position that fits my thesis, and hindsight is 20/20, though he had to know the danger. Berkshire positions are so large, and they have to report trades which swings the market, so leaving an overvalued position quickly enough isn't even a real option for him anymore.
In the end Buffet and Munger got rich over investing in a short list of good companies. They didn't try to be an S&P 500 index fund with 100 positions, or swing trading from stock to stock. There is a lesson in that too. Buy and mostly hold forever has served them well. All you have to do is pick some above average companies and stay in the market for 70 years and it all works out.
But as WB has said--no one ever went broke taking a little profit off the top--something like that...
[/quote]
The "off the top" part of that statement is probably the key to increased probability of success. When things go your way, peeling some profits will often be wise. My investing heroes like WB say a lot of things, and added all together you get some contradictions you have to sort through.
WB's number # rule is don't lose money. That's a little vague of course, and to me it means don't take unnecessary risk. If you put a kill shot on your port it's hard to recover. WB is also a value investor, that is inarguable. Now add those two rules together and it implies you don't mindlessly hold a huge position in KO when there is no hope a low growth industry can justify the PE even if a decade of good times occur. I am cherry picking one position that fits my thesis, and hindsight is 20/20, though he had to know the danger. Berkshire positions are so large, and they have to report trades which swings the market, so leaving an overvalued position quickly enough isn't even a real option for him anymore.
In the end Buffet and Munger got rich over investing in a short list of good companies. They didn't try to be an S&P 500 index fund with 100 positions, or swing trading from stock to stock. There is a lesson in that too. Buy and mostly hold forever has served them well. All you have to do is pick some above average companies and stay in the market for 70 years and it all works out.